Bried Exercises 10-13 201. McDonald's Corporation reports total averape assets of $28.9 Life Discuss the implications this has for comparing the results of the billion and net sales of $205 billion. What is the company's awet two companies turnover 24. Sosa Company is doing significant work to revitalize its ware- 21. Stark Corporation and Zaber Corporation operate in the same houses. It is not sure whether it should capitalize these costs or ex industry. Stark uses the straight line method to account for deprecia pense them. What are the implications for current year net income tin Zuberes an accelerated method. Explain what complications and future net income of expensing verses capitalizing these cost? might arise in trying to compare the results of these two companies 28. When we exchanged in a transaction involving commercial 22. Goma Corporation uses straight-line depreciation for financial substance, how is the gaineks on disposal of plant assets computed! reporting purposes but an accelerated method for purposes. Mit 26. Urh Refrigeration Company trudes in an old machine on a new acceptable to use different methods for the purposes? What is Gomez's motivation for doing this? model when the fair value of the old machine is greater than its back value. The transaction has commercial sattare. Should Unruhe 23. You are comparing two companies in the same industry. You ognire again on disposal of plant ats? If the fair value of the old have determined that Ace Corp. depreciates its plant assets over a 40 machine is less than its book value, should Unruh recognize a loss on year life, whereas Liu Corp.depreciates its plantasets over a 20-year disposal of plants? Brief Exercises BEG.1 (LO 1) The following expenditures were incurred by McCoy Company in purchasing land cash Din caufland price SSD, accrued taxes $3,000 attorneys les 52.00. real estate broker's commission $2.001 and clearing and grading $3.500. What is the cost of the land? BEZ (LO 1) Rich Castillo Company incurs the following expenditures in purchasing a truck cah Permite com famuk price $20.000. accident insurance $2,000, sales taxes $2.100, motor vehicle license S100, and painting ind lettering $400. What is the cost of the track? BEROS (LO 1) Flaherty Company had the following two transactions related to its delivery track. 1. Paid SAS for an oil change 2. Paid S40x) to install special goar unit which increases the operating efficiency of the truck Prepare Maherty's journal entries to recond these two transactions HEIO (LO 2) Coal Company acquires a delivery truck at a cost of $18,000. The track is expected to Comune direction have a salvage valkie of $6,000 at the end of its .year useful life Compute annual depreciation expenie For the first and second years using the straight line method BE10.5 (L03) Chienhall Company purchased land and a building on January 1, 2030. Management's Cor depiwand bext estimate of the value of the land was $100.000 and of the building $200.000 Hoever, management told the accounting department to record the land a $220,000 and the building a $80,000. The building is being deprecated on a straight line basis over 15 years with co salvape value. Why do you suppose management requested this accounting treatment? Is it ethical! BE06 (LO 2) Depreciation information for Corales Company is given in BE10.4. Assuming the Completing alone declining balance depreciation rate is double the straight line rate computeanual depreciation for the epito first and second years under the declining-balance method BE10.7 (LO 2) Ronco Taxi Service uses the unit of activity method in computing depreciation on its Compur der nogle takicabs. Each cab is expected to be driven 150.000 miles Taxi no. 10 cost $39.500 and is expected to have a salvage value of $500. Tai, 10 ks drive 30.000 miles in year and 20.000 miles in year 2 Compute the depreciation for cach year. BE16.8 ILO 2. On January , 2020, the Morgantown Company lodgers Equipment 532.000 and Compet depono. Accumulated Depreciation Equipment 9.000. The depreciation resulted from using the straight-line method with a useful life of 10 years and salvage value of $2.000. On this date, the company concludes that the equipment has a remaining useful life of only 4 years with the same salvage value. Compute the revised annual depreciation. BE109 (LO 3) Prepare journal entries to record the following Po diplos a. Sound Tracker Company retires its delivery equipment, which cont S11.000. Accumulated depreciation is also 541.000 on this delivery apprent. No salvape value is received 10-34 CHAPTER 10 Plant Assets, Natural Resources, and intangible Assets Assume the same informtion as (2) except that accumulated depreciation is $27.000). Instead of $41.660, on the delivery equipment Presentes for diesel by a BE:10.10 [LO 3) Gunkel Company sells equipment September 30, 2020. for $18.000 cash. The equipment originally coz $72,000 and an of January 1, 2020, had accumulated depreciation of $42.000 Depreciation for the first months of 2020 is $5.250. Prepare the journal entries to al update deprecis tion to September 10, 2020, and checond the sale of the equipment 10.11 (LO 4 Financial Statement Frances Mining Co. purchased for $7 million a mine that the perform is estimated to have 35 million tons oxfore and on salvage value. In the first year 5 millions of one are extracted 2. Prepare the journal entry to record depletion for the first year h. Show hin this mine is reported on the balance sheet at the end of the first year Pwani BETO (LO 41 Financial Statement Campaner Company purchases a potent for $140,000 on und lances January 2, 2000. Is estimated useful life is 10 years 2. Prepare the journal entry to rocond amortization experne for the first year 1. Slow how this patent in reported on the balance sheet at the end of the first year Clawdy fondlam BE10.13 ILO 5) Financial Statement Information related to plant assets, natural resources and intangibles at the end of 2020 for Dent Company is as follows buildings $1,100,000, secumulated depreciation buildings S600.000. goodwill $410,000, coal mine $500X0 and accumulated depletion cral mine STOK.000. Prepare a partial balance sheet of Dent Company for these item. BE10.14 [LOS) In a recent annual report. Target reported beginning total sets of $44.1 hilli, ending total assets of S445 billion and net sales of $63.4 billion Compute Target's se turnover Prepare wroby "BE10.15 (LOG) Olathe Company exchanges old delivery equipment for how delivery quipment. The book value of the old delivery quipment is $31.000 (561.000 les accumulated depreciation $30,000). Its fair value is 524.000, and cash of 55.00) is puid. Prepare the entry to record the exchange ming the transaction has comercial substance. Premyerden *BER 16 (LOG) Assume the same information as BE 10:15, except that the fair value of the old delivery equipment is 533.000. Prepare the entry to record the exchange. DO IT! Exercises per con DOI: 10.1 (LON) Lofon Company purchased a delivery truck. The tal cash payment was $27.900 including the following items Negotiated purchase price 524.000 Installation of special shelving 1.100 Painting and lettering 900 Motor vehicle license 100 Annual insurance policy 500 Sales tax 1.300 Toral paid $27.900 Explain how each of these con would be accounted for DO ITI 10.a (LD2) On January 1, 2020, Emporia Country Club puched a new riding mower for $15.000. The mower is expected to have an 8-year life with a $1.000 akupe value. What journal entry would Epociu make at December 31, 2020. if it uses straight line depreciation? DO ITI 20.2b (LO2) Pinewood Corporation purchased a piece of equipment for S70,000. Ir estimated in 8 year life and $2,000 salvage value. At the end of year for before the depreciation adjustment it estimated the new total life to be 10 years and the new salvage value to be $6.000. Compute the revised depreciation DO ITI 10.3 (LO3) Napoli Manufacturing has old qipment that cost $52.000. The equipment accumulated depreciation of 528,000. Napoli has decided to sell the equipment Code departe expense and marry Colowakei Make ya wanaw vel Exercises 10-35 . What entry would Napoli make to record the sale of the equipment for $260.000 cash! . What entry would Napoli make to record the sale of the equipment for $15.000 cash? DO ITI 204 (04) Match the statement with the term moes directly wciated with it Goodsalt Amortization Intangible acts Franchises Rescarch and development and 1. Right, privileges, and competitive advantages that result from the ownership of long-lived iets that do not posses plysical substance. The allocation of the cost of an intangible set to expense is a rational and systematic minnet A right to sell certain products or services, or we certain trademarks or trade names within a designated geographic arca 4. Costs incurred by a company that allen lead to patents or new products. These cous me he expened and 5. The wess of the cost of a company over the fair value of the masses acquired. DO IT! 10.5 (LOS) For 2000. Sale Company reported beginning toalets of 300.000 and ending total acts of 340,000 tos net income for this period was $50.000, and its net sales were $400.000 Computer company tower 2. Exercises E16.1 LO 1) Writing The following expenditures relating to plant assets were made by Puthier Dement of pineare Company during the line 2 math of 2020 1. Paid 5.000 ofered the time pont site acquired 2. Paid $200 insurance to cover possible accident koes on sew factory machinery while the machinery 3. Paid 5850 sales taxes on new delivery truck 4. Paid 517.00 for purling ko and driveways on new plant site $. Paid $250 to have company name and advertising slogan pained on new delivery truck 6. Paid S.000 for installation of new factory machinery 7. Paid So for one year acident insurance policy on new delivery truck & Paid 575 vehicle license for the new truck Instructions Explain the application of the historical cond principle in determining the acquisition cost of plastic Lind the number of the forepine transactions, and opponite cach indicate the account title outch cach expenditure should be debited. E16.2 (LO 1) Benolia Company incurred the following costs 1. Sales tax on factory machinery purchased $ 3.000 2. Painting of and lettering on track immediately upon purchase 3. Installation and testing of factory machinery 2. 4. Real estate ber's command purchased 3. 5. Insurance premium paid for first year's insurance on new truck & Cost of landicuping on property purchased 2200 7. Cost of paving parking lot for new building constructed & Cost of clearing, draining and filling land 9. Architect's focs en el constructed building 10000 Instructions Indicate to which account Benedict wohl debit cach of the code Exercises 10-37 E10.8 [LO 2) Terry Wade, the new controller of Hellicot Company has reviewed the expected me ful lives and salvage values of selected depreciable at the beginning of 2020. His findings are as Condomuld Accumulated Typ Date Depreciation in Years Salvage Value of Asset Acquired 1/1/20 Om Proposed Old Proposed Building inn S800.000 $114.000 40 50 $40.000 $20,000 Warehouse 1/1/15 100.000 19.00 25 20 5.00 6.000 All assets are depreciated by the straight-line method. Hellickson Company uses a calendar year in pre- paring annual financial statements. After discussion management has agreed to accept Terry's proposed changes Instructions 2. Compute the revised annual depreciation on cach asset in 2020. (Show computation) h. Prepare the entry for entries to record depreciation on the building in 2020. Journal E109 (LOS) Presented below are selected transactions at Ridge Company for 2030 Jan. Retired a piece of machinery that was purchased on January 1, 2010. The machine con 562.000 on that date. It had a useful life of 10 years with no salvage value June 30 Sold a computer that was purchased on January 1, 2017. The computer cost $45.000 had a useful life of 5 years with no salvage value. The computer was sold for 314,000 Dec 31 Discarded a delivery truck that was purchased on January 1, 2016. The truck cow 533.000 It was depreciated based on a 6-year useful life with a $2.000 salvage value Instructions Journalire all entries required on the shove dates, including entries to update depreciation, where appl- cable, on assets disposed of. Ridge Company uses straight-line depreciation (Assume depreciation is up to date as of December 31, 2019.) E10.10 (LD2) Pryce Company was equipment that cost $65.00 when purchased on January 1, 2017. Journal entries for sale It has been depreciated using the straight-line method bused on estimated salvage value of 55.000 and upent an estimated weful life of 5 year Instructions Prepare Pryce Company's journal entries to record the sale of the equipment in these four independent siution, . Sold for $31.000 January 1, 2020 b. Sold for 531,000 on May 1, 2020 c. Sold for $11.000 on January 1, 2020 d. Sold for $11.000 on October 1, 2020 EII (L04) On July 1, 2020. Friedman Inc. invested $720,000 in a mine estimated to have 900.000 tons of ore of uniform grade. During the last 6 months of 2020, 100.000 tons of core were mined Instructions a. Prepare the journal entry to record depletion 1. Assume that the 100.000 tons of ore were mined, but only 80.000 units were sold. How are the costs applicable to the 200XXunsold units reported? E10.12(L04) The following are sclected 2000 transactions of Podigo Corporation Jon! Purchased a small company and conded goodwill of S150,000. Its useful life is indefinite May Purchased for $75.000 a potent with an estimated useful life of years and a legal life of 20 Instructions Prepare necessary adjusting entries at December 31 to record amortization required by the events above 10-38 CHAPTER 10 Plant Assets, Natural Resources, and intangible Assets Prepare entrie a 1.13 (LO4) Gill Company, cyanized in 2000, has the following transactions telated to intangible acts for the assets. inile 12/20 Purchased potent(year life) 5995.000 4/1/20 Goodwill purchased indefinite life) 360,000 7/1/20 10-year franchise; expiration date 7/1/2030 480,000 9/1/20 Research and development costs 185.000 Instructions Prepare the necessary entries to record these intangibles. All costs incurred were cash Make the adjusting citries as of December 31, 2000. recording any necessary amortization and reflecting all bat ances accurately as of that date Cake ETC.14 (LOS) During 2020, Paola Corporation reported netales of $3.500.000 and net income of $1.500.000. Its balance sheet reported average total assets of S1.400.000 Instructions Calculate the asset tover. Journal entries who E10.15 (LO6) Presented below are two independent transactions. Both transactions have commercial 1. Mercy Co exchanged old trucks (com 554.000 less $22.000 accumulated depreciation) ples casher $17.000 for new trucks. The old trucks had a fair value of $38.000 2. Pence Inc. trades its used machine (cost $12.000 les 54,000 accumulated depreciation for a new machine. In addition to exchanging the old machine which had a fait value of $11.000. Pence also paid carb of S2000. Instructions .. Prepare the entry to record the exchange of assets by Mercy Co. h. Prepare the entry to record the exchange of assets by Pence Inc. ournalisties for seg "E10.16 (LO 6) Rizzo's Delivery Company and Overland's Express Delivery exchanged delivery trucks mes. January 1, 2020. Rizzo's truck cost $22,000. It has accumulated depreciation of S15.000 and a fair values of 3.000. Overland's truck cost $10,000 thus accumulated depreciation of 58,000 and a fair value of $3,000. The transaction has commercial substance. Instructions 1. Joomalize the exchange for Rize's Delivery Company, h. Joomulize the exchange Rove Overland's Express Delivery Problems: Set A Delicious and and wide Excel PAOLA (L01) Venable Company was cegatired on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order $ 4.00 90.000 5.00 1. Contrailing and grading the land 2. Full payment to building contractor 3. Real estate lanes on and paid for the current year 4. Cost of real estate purchased as a plant site (lund S100.000 and building S15.000) 5. Excavation costs for new building 6 Architect's foes on building plans 7. Accrued real estate taxes paid at time of purchase of real estate & Cost of parking lots and driveways 9. Cost of demolishing building to make and suitable for construction of new building 145.000 35,000 TO 2.000 14.000 25.000 5930,000 Problems: Set A 10-39 Credit 10. Proceeds from salvage of demolished building $ 3.500 Instructions Analyze the foregoing transactions wing the following colheading on the sumber of cach Totals transaction in the lem space and insert the amounts in the appropriate colum. For amounts entered in and 5172.500 the Other Accounts column, also indicate the accountitles Buildings $135.000 Item Land Building Other Accounts PROZA (LO 2) In recent years, Avery Transportation purchased three wed bones. Because of fire quent turnover in the accounting department, a different costat elected the depreciation method w for cach bus, and various methods were selected. Information concerning the buses is summarized as follow Salvage Bus Aequired Cast Value in Vans Depreciation Method 11 5 000 $6.000 Straight line 11 110O 10.000 Deining balance 11/19 92,000 8.000 For the declining-bulance method, the company was the double-declining rate for the units-of-activity method total miles are expected to be 120,000. Actual miles of use in the ind 3 years were 2019,24,000 2020, 34.000, and 2001. 30.000 Instructions 2. Compute the amount of accumulated depreciatice on each bus at December 31, 2100 a Bus 2,12/31/19, 582,500 b. If Bus 2 was purchased on April t instead of January I. what is the depreciation expense for this bus in(t) 2018 (2) 2019 POOJA (LO 21 On January 1, 2000, Evers Company perchased the sallowing two machines for we in Corporation under diferent its production proces Machine A: The cash price of this machine was 548,000. Related expenditures included: sales tax $1.700. shipping ISO imurance during shipping sa intalni testing costs $70, and $100 of land lubricants to be wed with the machinery car ing its first year of operations Frescimates that the full of the machines years with a 55.000 vape vale remaining at the end of that time period. Asume that the straight line method of depreciation is used. Machine B: The reconlod cost of this machine was $180.000. Evers estimate that the useful life of the machine is 4 years with a $10,000 lage varening at the end of that time period Instructions .. Prepare the following for Machine A 1. The journal entry to record its purchase on January 1.2000 2. The journal entry to record anual depreciation at December 31, 2020 1. Calculate the amount of depreciation cxpense that Evers should record for Machine B cach year of its exclul life under the following in 1. Everses the straight-line method of depreciation 2. Evers uses the declining balance method. The mediatice the rigolinerale 212020 D depreciation 1. Every uses the tits-e-activity Meted and estimates that the colife of the machine is $90,000 125.00 unit. Actuala is as foi 2000 45.000 2001. 35.000 i 2022 25.000 units: 2023,20,000 units Which method used to calculate depreciation Machine B reports the lightestament of deprecia tion expense in year 1 (202017 The highest amount in your 4 2003 The highest malamenter the 4-year period PIOAA (LO 2) At the beginning of 2016, Mazzaro Company acquired comment costing S120.000 Calculate the depan was estimated that this equipment would have a useful life of 6 years and a value of $12.000 that time. The straight line method of depreciation was considered the most appropriate to use with this type of equipment Depreciation is to be recorded the end of each your Bried Exercises 10-13 201. McDonald's Corporation reports total averape assets of $28.9 Life Discuss the implications this has for comparing the results of the billion and net sales of $205 billion. What is the company's awet two companies turnover 24. Sosa Company is doing significant work to revitalize its ware- 21. Stark Corporation and Zaber Corporation operate in the same houses. It is not sure whether it should capitalize these costs or ex industry. Stark uses the straight line method to account for deprecia pense them. What are the implications for current year net income tin Zuberes an accelerated method. Explain what complications and future net income of expensing verses capitalizing these cost? might arise in trying to compare the results of these two companies 28. When we exchanged in a transaction involving commercial 22. Goma Corporation uses straight-line depreciation for financial substance, how is the gaineks on disposal of plant assets computed! reporting purposes but an accelerated method for purposes. Mit 26. Urh Refrigeration Company trudes in an old machine on a new acceptable to use different methods for the purposes? What is Gomez's motivation for doing this? model when the fair value of the old machine is greater than its back value. The transaction has commercial sattare. Should Unruhe 23. You are comparing two companies in the same industry. You ognire again on disposal of plant ats? If the fair value of the old have determined that Ace Corp. depreciates its plant assets over a 40 machine is less than its book value, should Unruh recognize a loss on year life, whereas Liu Corp.depreciates its plantasets over a 20-year disposal of plants? Brief Exercises BEG.1 (LO 1) The following expenditures were incurred by McCoy Company in purchasing land cash Din caufland price SSD, accrued taxes $3,000 attorneys les 52.00. real estate broker's commission $2.001 and clearing and grading $3.500. What is the cost of the land? BEZ (LO 1) Rich Castillo Company incurs the following expenditures in purchasing a truck cah Permite com famuk price $20.000. accident insurance $2,000, sales taxes $2.100, motor vehicle license S100, and painting ind lettering $400. What is the cost of the track? BEROS (LO 1) Flaherty Company had the following two transactions related to its delivery track. 1. Paid SAS for an oil change 2. Paid S40x) to install special goar unit which increases the operating efficiency of the truck Prepare Maherty's journal entries to recond these two transactions HEIO (LO 2) Coal Company acquires a delivery truck at a cost of $18,000. The track is expected to Comune direction have a salvage valkie of $6,000 at the end of its .year useful life Compute annual depreciation expenie For the first and second years using the straight line method BE10.5 (L03) Chienhall Company purchased land and a building on January 1, 2030. Management's Cor depiwand bext estimate of the value of the land was $100.000 and of the building $200.000 Hoever, management told the accounting department to record the land a $220,000 and the building a $80,000. The building is being deprecated on a straight line basis over 15 years with co salvape value. Why do you suppose management requested this accounting treatment? Is it ethical! BE06 (LO 2) Depreciation information for Corales Company is given in BE10.4. Assuming the Completing alone declining balance depreciation rate is double the straight line rate computeanual depreciation for the epito first and second years under the declining-balance method BE10.7 (LO 2) Ronco Taxi Service uses the unit of activity method in computing depreciation on its Compur der nogle takicabs. Each cab is expected to be driven 150.000 miles Taxi no. 10 cost $39.500 and is expected to have a salvage value of $500. Tai, 10 ks drive 30.000 miles in year and 20.000 miles in year 2 Compute the depreciation for cach year. BE16.8 ILO 2. On January , 2020, the Morgantown Company lodgers Equipment 532.000 and Compet depono. Accumulated Depreciation Equipment 9.000. The depreciation resulted from using the straight-line method with a useful life of 10 years and salvage value of $2.000. On this date, the company concludes that the equipment has a remaining useful life of only 4 years with the same salvage value. Compute the revised annual depreciation. BE109 (LO 3) Prepare journal entries to record the following Po diplos a. Sound Tracker Company retires its delivery equipment, which cont S11.000. Accumulated depreciation is also 541.000 on this delivery apprent. No salvape value is received 10-34 CHAPTER 10 Plant Assets, Natural Resources, and intangible Assets Assume the same informtion as (2) except that accumulated depreciation is $27.000). Instead of $41.660, on the delivery equipment Presentes for diesel by a BE:10.10 [LO 3) Gunkel Company sells equipment September 30, 2020. for $18.000 cash. The equipment originally coz $72,000 and an of January 1, 2020, had accumulated depreciation of $42.000 Depreciation for the first months of 2020 is $5.250. Prepare the journal entries to al update deprecis tion to September 10, 2020, and checond the sale of the equipment 10.11 (LO 4 Financial Statement Frances Mining Co. purchased for $7 million a mine that the perform is estimated to have 35 million tons oxfore and on salvage value. In the first year 5 millions of one are extracted 2. Prepare the journal entry to record depletion for the first year h. Show hin this mine is reported on the balance sheet at the end of the first year Pwani BETO (LO 41 Financial Statement Campaner Company purchases a potent for $140,000 on und lances January 2, 2000. Is estimated useful life is 10 years 2. Prepare the journal entry to rocond amortization experne for the first year 1. Slow how this patent in reported on the balance sheet at the end of the first year Clawdy fondlam BE10.13 ILO 5) Financial Statement Information related to plant assets, natural resources and intangibles at the end of 2020 for Dent Company is as follows buildings $1,100,000, secumulated depreciation buildings S600.000. goodwill $410,000, coal mine $500X0 and accumulated depletion cral mine STOK.000. Prepare a partial balance sheet of Dent Company for these item. BE10.14 [LOS) In a recent annual report. Target reported beginning total sets of $44.1 hilli, ending total assets of S445 billion and net sales of $63.4 billion Compute Target's se turnover Prepare wroby "BE10.15 (LOG) Olathe Company exchanges old delivery equipment for how delivery quipment. The book value of the old delivery quipment is $31.000 (561.000 les accumulated depreciation $30,000). Its fair value is 524.000, and cash of 55.00) is puid. Prepare the entry to record the exchange ming the transaction has comercial substance. Premyerden *BER 16 (LOG) Assume the same information as BE 10:15, except that the fair value of the old delivery equipment is 533.000. Prepare the entry to record the exchange. DO IT! Exercises per con DOI: 10.1 (LON) Lofon Company purchased a delivery truck. The tal cash payment was $27.900 including the following items Negotiated purchase price 524.000 Installation of special shelving 1.100 Painting and lettering 900 Motor vehicle license 100 Annual insurance policy 500 Sales tax 1.300 Toral paid $27.900 Explain how each of these con would be accounted for DO ITI 10.a (LD2) On January 1, 2020, Emporia Country Club puched a new riding mower for $15.000. The mower is expected to have an 8-year life with a $1.000 akupe value. What journal entry would Epociu make at December 31, 2020. if it uses straight line depreciation? DO ITI 20.2b (LO2) Pinewood Corporation purchased a piece of equipment for S70,000. Ir estimated in 8 year life and $2,000 salvage value. At the end of year for before the depreciation adjustment it estimated the new total life to be 10 years and the new salvage value to be $6.000. Compute the revised depreciation DO ITI 10.3 (LO3) Napoli Manufacturing has old qipment that cost $52.000. The equipment accumulated depreciation of 528,000. Napoli has decided to sell the equipment Code departe expense and marry Colowakei Make ya wanaw vel Exercises 10-35 . What entry would Napoli make to record the sale of the equipment for $260.000 cash! . What entry would Napoli make to record the sale of the equipment for $15.000 cash? DO ITI 204 (04) Match the statement with the term moes directly wciated with it Goodsalt Amortization Intangible acts Franchises Rescarch and development and 1. Right, privileges, and competitive advantages that result from the ownership of long-lived iets that do not posses plysical substance. The allocation of the cost of an intangible set to expense is a rational and systematic minnet A right to sell certain products or services, or we certain trademarks or trade names within a designated geographic arca 4. Costs incurred by a company that allen lead to patents or new products. These cous me he expened and 5. The wess of the cost of a company over the fair value of the masses acquired. DO IT! 10.5 (LOS) For 2000. Sale Company reported beginning toalets of 300.000 and ending total acts of 340,000 tos net income for this period was $50.000, and its net sales were $400.000 Computer company tower 2. Exercises E16.1 LO 1) Writing The following expenditures relating to plant assets were made by Puthier Dement of pineare Company during the line 2 math of 2020 1. Paid 5.000 ofered the time pont site acquired 2. Paid $200 insurance to cover possible accident koes on sew factory machinery while the machinery 3. Paid 5850 sales taxes on new delivery truck 4. Paid 517.00 for purling ko and driveways on new plant site $. Paid $250 to have company name and advertising slogan pained on new delivery truck 6. Paid S.000 for installation of new factory machinery 7. Paid So for one year acident insurance policy on new delivery truck & Paid 575 vehicle license for the new truck Instructions Explain the application of the historical cond principle in determining the acquisition cost of plastic Lind the number of the forepine transactions, and opponite cach indicate the account title outch cach expenditure should be debited. E16.2 (LO 1) Benolia Company incurred the following costs 1. Sales tax on factory machinery purchased $ 3.000 2. Painting of and lettering on track immediately upon purchase 3. Installation and testing of factory machinery 2. 4. Real estate ber's command purchased 3. 5. Insurance premium paid for first year's insurance on new truck & Cost of landicuping on property purchased 2200 7. Cost of paving parking lot for new building constructed & Cost of clearing, draining and filling land 9. Architect's focs en el constructed building 10000 Instructions Indicate to which account Benedict wohl debit cach of the code Exercises 10-37 E10.8 [LO 2) Terry Wade, the new controller of Hellicot Company has reviewed the expected me ful lives and salvage values of selected depreciable at the beginning of 2020. His findings are as Condomuld Accumulated Typ Date Depreciation in Years Salvage Value of Asset Acquired 1/1/20 Om Proposed Old Proposed Building inn S800.000 $114.000 40 50 $40.000 $20,000 Warehouse 1/1/15 100.000 19.00 25 20 5.00 6.000 All assets are depreciated by the straight-line method. Hellickson Company uses a calendar year in pre- paring annual financial statements. After discussion management has agreed to accept Terry's proposed changes Instructions 2. Compute the revised annual depreciation on cach asset in 2020. (Show computation) h. Prepare the entry for entries to record depreciation on the building in 2020. Journal E109 (LOS) Presented below are selected transactions at Ridge Company for 2030 Jan. Retired a piece of machinery that was purchased on January 1, 2010. The machine con 562.000 on that date. It had a useful life of 10 years with no salvage value June 30 Sold a computer that was purchased on January 1, 2017. The computer cost $45.000 had a useful life of 5 years with no salvage value. The computer was sold for 314,000 Dec 31 Discarded a delivery truck that was purchased on January 1, 2016. The truck cow 533.000 It was depreciated based on a 6-year useful life with a $2.000 salvage value Instructions Journalire all entries required on the shove dates, including entries to update depreciation, where appl- cable, on assets disposed of. Ridge Company uses straight-line depreciation (Assume depreciation is up to date as of December 31, 2019.) E10.10 (LD2) Pryce Company was equipment that cost $65.00 when purchased on January 1, 2017. Journal entries for sale It has been depreciated using the straight-line method bused on estimated salvage value of 55.000 and upent an estimated weful life of 5 year Instructions Prepare Pryce Company's journal entries to record the sale of the equipment in these four independent siution, . Sold for $31.000 January 1, 2020 b. Sold for 531,000 on May 1, 2020 c. Sold for $11.000 on January 1, 2020 d. Sold for $11.000 on October 1, 2020 EII (L04) On July 1, 2020. Friedman Inc. invested $720,000 in a mine estimated to have 900.000 tons of ore of uniform grade. During the last 6 months of 2020, 100.000 tons of core were mined Instructions a. Prepare the journal entry to record depletion 1. Assume that the 100.000 tons of ore were mined, but only 80.000 units were sold. How are the costs applicable to the 200XXunsold units reported? E10.12(L04) The following are sclected 2000 transactions of Podigo Corporation Jon! Purchased a small company and conded goodwill of S150,000. Its useful life is indefinite May Purchased for $75.000 a potent with an estimated useful life of years and a legal life of 20 Instructions Prepare necessary adjusting entries at December 31 to record amortization required by the events above 10-38 CHAPTER 10 Plant Assets, Natural Resources, and intangible Assets Prepare entrie a 1.13 (LO4) Gill Company, cyanized in 2000, has the following transactions telated to intangible acts for the assets. inile 12/20 Purchased potent(year life) 5995.000 4/1/20 Goodwill purchased indefinite life) 360,000 7/1/20 10-year franchise; expiration date 7/1/2030 480,000 9/1/20 Research and development costs 185.000 Instructions Prepare the necessary entries to record these intangibles. All costs incurred were cash Make the adjusting citries as of December 31, 2000. recording any necessary amortization and reflecting all bat ances accurately as of that date Cake ETC.14 (LOS) During 2020, Paola Corporation reported netales of $3.500.000 and net income of $1.500.000. Its balance sheet reported average total assets of S1.400.000 Instructions Calculate the asset tover. Journal entries who E10.15 (LO6) Presented below are two independent transactions. Both transactions have commercial 1. Mercy Co exchanged old trucks (com 554.000 less $22.000 accumulated depreciation) ples casher $17.000 for new trucks. The old trucks had a fair value of $38.000 2. Pence Inc. trades its used machine (cost $12.000 les 54,000 accumulated depreciation for a new machine. In addition to exchanging the old machine which had a fait value of $11.000. Pence also paid carb of S2000. Instructions .. Prepare the entry to record the exchange of assets by Mercy Co. h. Prepare the entry to record the exchange of assets by Pence Inc. ournalisties for seg "E10.16 (LO 6) Rizzo's Delivery Company and Overland's Express Delivery exchanged delivery trucks mes. January 1, 2020. Rizzo's truck cost $22,000. It has accumulated depreciation of S15.000 and a fair values of 3.000. Overland's truck cost $10,000 thus accumulated depreciation of 58,000 and a fair value of $3,000. The transaction has commercial substance. Instructions 1. Joomalize the exchange for Rize's Delivery Company, h. Joomulize the exchange Rove Overland's Express Delivery Problems: Set A Delicious and and wide Excel PAOLA (L01) Venable Company was cegatired on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order $ 4.00 90.000 5.00 1. Contrailing and grading the land 2. Full payment to building contractor 3. Real estate lanes on and paid for the current year 4. Cost of real estate purchased as a plant site (lund S100.000 and building S15.000) 5. Excavation costs for new building 6 Architect's foes on building plans 7. Accrued real estate taxes paid at time of purchase of real estate & Cost of parking lots and driveways 9. Cost of demolishing building to make and suitable for construction of new building 145.000 35,000 TO 2.000 14.000 25.000 5930,000 Problems: Set A 10-39 Credit 10. Proceeds from salvage of demolished building $ 3.500 Instructions Analyze the foregoing transactions wing the following colheading on the sumber of cach Totals transaction in the lem space and insert the amounts in the appropriate colum. For amounts entered in and 5172.500 the Other Accounts column, also indicate the accountitles Buildings $135.000 Item Land Building Other Accounts PROZA (LO 2) In recent years, Avery Transportation purchased three wed bones. Because of fire quent turnover in the accounting department, a different costat elected the depreciation method w for cach bus, and various methods were selected. Information concerning the buses is summarized as follow Salvage Bus Aequired Cast Value in Vans Depreciation Method 11 5 000 $6.000 Straight line 11 110O 10.000 Deining balance 11/19 92,000 8.000 For the declining-bulance method, the company was the double-declining rate for the units-of-activity method total miles are expected to be 120,000. Actual miles of use in the ind 3 years were 2019,24,000 2020, 34.000, and 2001. 30.000 Instructions 2. Compute the amount of accumulated depreciatice on each bus at December 31, 2100 a Bus 2,12/31/19, 582,500 b. If Bus 2 was purchased on April t instead of January I. what is the depreciation expense for this bus in(t) 2018 (2) 2019 POOJA (LO 21 On January 1, 2000, Evers Company perchased the sallowing two machines for we in Corporation under diferent its production proces Machine A: The cash price of this machine was 548,000. Related expenditures included: sales tax $1.700. shipping ISO imurance during shipping sa intalni testing costs $70, and $100 of land lubricants to be wed with the machinery car ing its first year of operations Frescimates that the full of the machines years with a 55.000 vape vale remaining at the end of that time period. Asume that the straight line method of depreciation is used. Machine B: The reconlod cost of this machine was $180.000. Evers estimate that the useful life of the machine is 4 years with a $10,000 lage varening at the end of that time period Instructions .. Prepare the following for Machine A 1. The journal entry to record its purchase on January 1.2000 2. The journal entry to record anual depreciation at December 31, 2020 1. Calculate the amount of depreciation cxpense that Evers should record for Machine B cach year of its exclul life under the following in 1. Everses the straight-line method of depreciation 2. Evers uses the declining balance method. The mediatice the rigolinerale 212020 D depreciation 1. Every uses the tits-e-activity Meted and estimates that the colife of the machine is $90,000 125.00 unit. Actuala is as foi 2000 45.000 2001. 35.000 i 2022 25.000 units: 2023,20,000 units Which method used to calculate depreciation Machine B reports the lightestament of deprecia tion expense in year 1 (202017 The highest amount in your 4 2003 The highest malamenter the 4-year period PIOAA (LO 2) At the beginning of 2016, Mazzaro Company acquired comment costing S120.000 Calculate the depan was estimated that this equipment would have a useful life of 6 years and a value of $12.000 that time. The straight line method of depreciation was considered the most appropriate to use with this type of equipment Depreciation is to be recorded the end of each your